MRF: Tired performance - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

MRF: Tired performance

Dec 24, 2001

The performance of MRF Limited, the market leader in the Indian tyre segment, reflects the downturn in the auto industry. Both sales and profits have nose-dived in light of slowdown in the economy. It must be noted that MRF is a September year ending company.

(Rs m) FY00 FY01 Change
Sales 19,038 17,140 -10.0%
Other Income 55 40 -26.4%
Expenditure 16,408 15,192 -7.4%
Operating Profit (EBDIT) 2,630 1,948 -25.9%
Operating Profit Margin (%) 13.8% 11.4%  
Interest 643 557 -13.4%
Depreciation 1,078 944 -12.5%
Profit before Tax 964 487 -49.4%
Tax 323 170 -47.4%
Profit after Tax/(Loss) 641 317 -50.5%
Net profit margin (%) 3.4% 1.9%  
No. of Shares (m) 4.2 4.2  
Diluted Earnings per share* 152.5 75.6  
P/E Ratio   8.7  

MRF is India’s largest tyre manufacturer with a market share of 22%. The company derives over 95% of its revenues from its tyre business, the rest coming from its presence in toys and paints. It is a key player in the Original Equipment Manufacturer (OEM) segment.

Auto industry in FY01
(% change) Production Sales
Cars -12.6% -7.5%
Multi Utility Vehicle 1.3% 2.8%
LCV's 4.3% 4.5%
M & HCV's -21.5% -21.3%
TOTAL (4 wheelers) -10.6% -7.0%
TOTAL VEHICLES -2.3% -1.9%

MRF's sales fell by 10% to Rs 17,140 m for FY01. While overall four wheeler sales registered a decline of 7% in sales, this was primarily led by a sharp fall in passenger cars and heavy commercial vehicles segment, that account for a bulk of the industry volume. MRF being a key supplier to most of the auto majors was affected by the slowdown.

Also, prices of one of the key raw materials used in manufacture of tyres, carbon black, went up sharply in FY01 due to higher crude prices. Carbon black manufacturers, both in India and globally, raised prices to pass on the increase in costs to the customers. To put things in perspective, Indian Rayon, one of the market leaders in the Indian carbon black industry raised prices by 19% to Rs 27,000 per tonne (US$ 563 per tonne) in FY01. This along with other factors like lower CV demand, competition in the retail segment (domestic as well as imports) has exercised a downward pressure on margins. As a result, operating profit fell by 26% in FY01. The fall in net profits would have been sharper if not for lower interest and depreciation costs.

The prospects for the current year are also challenging. Competition has intensified in the tyre industry with the entry of multinationals like Bridgestone and Michelin. Multinational auto companies, who have presence in India, increasingly prefer these companies on account of their global relationships. There has also been undercutting of prices in recent years in an attempt to boost volume growth. Apollo, for example, had reduced radial tyre prices by almost 25% last year. MRF also has to contend with threats of cheaper imports, which are only going to be cheaper in the coming years. Though passenger car sales have shown signs of improvement in recent months, given the slowdown in the economy, one has to see if volume growth sustains for the rest of the year. However, being a market leader in the tyre segment coupled with its brand equity, MRF is expected to report a improved performance for FY02. MRF currently trades at Rs 659 implying a P/E multiple of 8.7x FY01 earnings.


Equitymaster requests your view! Post a comment on "MRF: Tired performance". Click here!

  

More Views on News

MRF LTD. Announces Quarterly Results (1QFY21); Net Profit Down 93.7% (Quarterly Result Update)

Sep 10, 2020 | Updated on Sep 10, 2020

For the quarter ended June 2020, MRF LTD. has posted a net profit of Rs 170 m (down 93.7% YoY). Sales on the other hand came in at Rs 24 bn (down 44.9% YoY). Read on for a complete analysis of MRF LTD.'s quarterly results.

MRF LTD. Announces Quarterly Results (3QFY20); Net Profit Down 15.3% (Quarterly Result Update)

Feb 12, 2020 | Updated on Feb 12, 2020

For the quarter ended December 2019, MRF LTD. has posted a net profit of Rs 2 bn (down 15.3% YoY). Sales on the other hand came in at Rs 40 bn (down 0.6% YoY). Read on for a complete analysis of MRF LTD.'s quarterly results.

MRF LTD. 2018-19 Annual Report Analysis (Annual Result Update)

Jul 24, 2019 | Updated on Jul 24, 2019

Here's an analysis of the annual report of MRF LTD. for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of MRF LTD.. Also includes updates on the valuation of MRF LTD..

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

MRF LTD. SHARE PRICE


Sep 22, 2020 (Close)

TRACK MRF LTD.

  • Track your investment in MRF LTD. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MRF LTD. 8-QTR ANALYSIS

COMPARE MRF LTD. WITH

MARKET STATS